Question Period Note: U.S. ANTITRUST CASE AGAINST FACEBOOK

Is competition law enforcement warranted against Facebook in Canada?

• The Government of Canada is following news about the U.S. Federal Trade Commission’s enforcement action against Facebook with great interest.

• In Canada, enforcement of the Competition Act is handled independently and in private by the Competition Bureau. Accordingly, the government cannot comment on potential enforcement action here.

• If there is evidence of a breach of Canadian competition law, the government is confident that the Bureau will act as necessary.

On December 9, 2020, the United States Federal Trade Commission (FTC) filed suit against Facebook, alleging monopolistic conduct under the U.S. Sherman Act because of a prolonged period of anti-competitive conduct. Suits were also launched by 46 states, the District of Columbia, and Guam. The FTC argues that Facebook has engaged in a systematic strategy to maintain market power, including by acquiring potential rivals Instagram and WhatsApp after initially trying to compete with them, and by imposing anticompetitive conditions on software developers’ data access.

Court relief sought by the FTC would require, among other things: that Facebook divest Instagram and WhatsApp (and potentially other assets); that Facebook’s imposition of anticompetitive conditions on software developers be prohibited; and that prior notice and approval for future mergers and acquisitions be required from Facebook.

Facebook claims that the FTC’s action is an attempt to reopen the authorizations already granted by the FTC for its prior acquisitions. In most antitrust regimes, including in the U.S. and Canada, mergers are subject to review for competitive impact, and can face legal challenge if not modified to preserve competition. This process is separate from investigations into anti-competitive conduct such as the present lawsuit.

In Canada, the Competition Act (the Act) is administered and enforced independently by the Competition Bureau (Bureau). Investigations are conducted in private, and information kept confidential. The Department is therefore not generally aware of the existence or state of any given investigation unless it is revealed to the public, such as by a statement from one of the investigative targets or a legal proceeding.

Where a dominant firm engages in a practice of anti-competitive acts with a harmful effect on competition, the Bureau can apply to the Competition Tribunal for an order under the Act’s provision on abuse of a dominant position up to three years after a given instance. This will generally require evidence of sustained action with an intended negative effect on a competitor. Potential remedies include a prohibition order, administrative monetary penalties up to $10 million for a first instance, or potentially divestitures.

The Instagram and WhatsApp acquisitions took place in 2012 and 2014 respectively, and would have been reviewable under the Act’s merger provisions for up to one year after substantial completion of each transaction.

Facebook was recently the target of an investigation under a different part of the Act that addresses deceptive marketing. In May 2020, the Bureau and Facebook reached a settlement in which Facebook agreed to pay a $9 million penalty after the Bureau concluded that the company made false or misleading representations about the privacy of Canadians’ personal information on Facebook and Messenger.

The Bureau is also engaged in a publicly-known investigation against another digital giant. In August 2020, it invited market participants to provide input to inform a potential abuse of dominance case against Amazon. The investigation is ongoing and there have been no public findings at this time.

• The FTC and 46 U.S. jurisdictions are claiming that Facebook has engaged in monopolistic conduct, including through acquisition of potential threats in Instagram and WhatsApp, and is seeking divestiture of those companies.

• A remedial order under Canada’s comparable provision in the Competition Act, abuse of a dominant position, can result in administrative monetary penalties and potentially even divestitures if the criteria in the law and jurisprudence are met.

• Abuse cases are heavily dependent on facts and economic evidence, and subject to a three-year limitation period.